India looks to expand its plan on strategic petroleum reserves overseas, say sources

KEY STORY

• New Delhi: With crude oil being on the boil, India is looking to bolster its strategic petroleum reserves. The government is looking for a better option to deal with excess price volatility and supply disruptions.

• Sources tell ET Now that government of India has written request letters through its embassies to Middle east, Singapore and Europe on a prospective strategic oil reserves agreement.

• The US offer is for using their salt caverns to store India’s strategic oil reserves. This form of storage allows extraction of oil only once in five years. So, it creates limitations in using this overseas strategic oil in times of exigencies.

• The US offer is there but we have not taken a call on it. Sources said that with the US option to use salt caverns almost rejected, India will explore the availability of alternate storage options in the country or look for facilities in Europe or the Middle East.

• India is not very keen on arranging a deal with neighbouring countries like Japan, China, and Korea though in Comparison with India, Asian Neighbours such as China, Japan and South Korea have much bigger SPRs.

• China’s total capacity is 550 million barrels, Japan’s SPR is 528 million barrels and South Korea’s 214 million barrels as against a paltry 39 million barrels for India.

• India has built strategic oil reserve capacity of 5.33 million Tonnes (MT) at three locations in southern India — Visakhapatnam, Mangaluru, and Padur. But the reserve is still very small as even at full capacity it would meet the country’s import substitution of just nine days, which is considered too low.

• India is already the fourth-largest buyer of US oil and fifth largest for LNG. The bilateral hydrocarbon trade has expanded 93 per cent in the last two years to $9.2 billion in 2019-20, which is 10 per cent of the total trade between the two countries.